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Moody's downgrades Alcatel-Lucent

The Associated Press

Moody's Investors Service on Tuesday downgraded several ratings on Alcatel-Lucent S.A. on concerns that the communications technology company will not be able to adequately reduce expenses.

The rating agency downgraded the French company's corporate family rating and probability of default rating one notch in junk-grade status to "B3" from "B2," among other downgrades. The outlook on all ratings remains negative, indicating that the agency could lower them further in the near future.

Moody's said that it is concerned the company will not be able to cut its cash burn in 2012 below its 2011 levels. That reflects a contraction in Alcatel-Lucent's revenues gains, the rating agency said. It also reflects continued weakness in gross profit margins, which indicates it needs to renew its restructuring efforts.

The rating agency noted that the company has been consuming cash from operations since the 2006 merger of Alcatel and Lucent Technologies Inc. and that its cash burn increased nearly 43 percent in the 12 months to September 2012 from its 2011 fiscal year.

Moody's said the negative outlook on Alcatel-Lucent's rating reflects the company's ongoing spending relative to its liquidity.

Alcatel-Lucent shares rose 6 cents, or 5.5 percent, to close at $1.16.